The Coming War Over Innovation
With Hewlett-Packard's recent acquisition of Palm, the lines are being drawn for an epic showdown over the future of smartphones and tablets. The Daily Beast's John Kao on how consumers stand to benefit.
With Hewlett-Packard’s recent acquisition of Palm, the lines are now been being drawn for an innovation war of epic proportions. While today, the situation may appear as merely a battle over competing smartphone paradigms, it will inevitably escalate into a full-out war in the tablet space and other future domains.
Each brand boasts its own benefits. Palm’s WebOS carries obvious advantages in terms of multitasking and data integration. Apple leads with the extraordinary success of the App Store and its understanding of how power users want to move from screen to screen; iPhone to iPad to PowerBook. The tech giant also offers the mixed blessing of a closed universe of Apple stylishness, while Android—a Google acquisition, interestingly enough—works the other side of the street with a platform strategy designed to bring the smartphone experience to a variety of handset manufacturers. Research in Motion (or RIM), meanwhile, is striving to maintain its leading and increasingly vulnerable franchise, while others look to re-hone the value proposition of their technology. (Microsoft, anyone?)
The bar is being raised at warp speed. And we, the users, will be the ultimate beneficiaries.
The bottom line is that each major smartphone player is striving to innovate its way to a standard that locks in a customer franchise today—and with enough of a superior offering that will ensure business success tomorrow. HP obviously decided that it had to be a bigger part of this action. (Any iPAQ owners out there?)
The exciting part is: Anything can happen as this story unfolds. Recall Betamax vs. VHS. The technologically superior format of the former didn’t win in the end. In today’s tech landscape, we have multiple standards competing in terms of feature sets that are rapidly evolving along multiple fronts. The bar is being raised at warp speed. And we, the users, will be the ultimate beneficiaries, as the smartphone giants continue to woo us by competing through innovation.
There is also the question of why HP, an icon of innovation and originator of the Silicon Valley “garage,” would resort to a strategy of what one might call innovation through mergers and acquisitions. Two reasons for this approach are worth mentioning. First, scale requires a model of innovation different from launching a bunch of startup ventures, Silicon Valley-style. This is especially important when it comes to assuring the kind of growth rates that Wall Street expects. For a $120-billion-revenue company to grow at a reasonable rate, big bets are required—gambles that carry a certain amount of insurance in the form of proprietary technology, track record, customer franchises, and brand equity.
Big pharmaceutical companies have long known this reality as they increasingly evolve to resemble banks, brands, and distribution channels, rather than science hothouses. It can be far easier to look for and buy promising companies with emerging technology franchises that have reached some level of commercial significance. Any equity premiums paid are small beer compared with the upside of being able to marry a new and, at least, semi-proven product to an established machinery for finance, marketing, and distribution.
HP also stands to gain from an infusion of new talent that has been seasoned in a younger entrepreneurial culture—one that is still driven by unfulfilled dreams. The benefits for Palm, on the other hand, are obvious and stark: survival in a world where having a rock-star product is far from a guarantee of commercial success. This is an alliance of need in a time of war.
Dubbed "Mr. Creativity" by The Economist, John calls himself an innovation activist. He is chairman of the Institute for Large Scale Innovation, whose i20 group is an association of national innovation "czars." He wrote Jamming: The Art and Discipline of Business Creativity, a BusinessWeek bestseller, and Innovation Nation, about America's growing innovation challenge. He is also a Tony-nominated producer of film and stage. Follow him on Twitter at @ johnkao.